Revenue Forecasting: a Professional Services Firm’s Secret Weapon

Learn why revenue forecasting is so critical for professional services firms – and its overall business impact.

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    Revenue forecasting is a process used to predict future revenue for the purpose of making strategic business decisions. It plays a key role in helping firms secure long-term profitability, increase market share, and keep competitors at bay.

    Among professional services pros, revenue forecasting has long been considered more “art” than “science.” Though, with recent advances in AI and predictive analytics, it’s evolving into a data-driven, scientific practice where human experts and intelligent machines work together to prepare for an uncertain future.

    Effective forecasting is also really hard to pull off – in large part because project-based work is inherently unpredictable.

    See, it doesn’t matter how good the tech is or how knowledgeable your experts are, there’s no way to be sure that you’ll have X amount of cash next quarter, year, decade, whatever.

    And, that’s a big problem. After all, the whole point of forecasting is making informed decisions about major expenses. Think – future transformation projects, acquisitions, and hiring and developing talent.

    Below, we’ll dig into the critical importance of revenue forecasting for professional services firms – and its overall business impact.

    Microsoft Dynamics 365 Buyer's Guide for Professional Services

    This guide will provide an overview of the entire platform and answer questions about features, selection, purchasing, implementation and support of the Dynamics 365 suite of solutions.

    How Revenue Forecasting Helps Professional Services Orgs Set the Stage for Future Wins

    At the high-level, revenue forecasting supports a forward-looking view of the firm and its overall direction — in context with day-to-day expenses and more immediate needs.

    Because they know how much money is coming in and how much is going out, business leaders are better positioned to make decisions about how to allocate resources — balancing high-level objectives with short-term goals. It also helps firms ensure they always have enough cash on hand to take immediate action the moment a game-changing opportunity emerges (or the next COVID-level disaster strikes).

    Revenue forecasting also supports resource planning and utilization, project accounting, and scheduling and informs the entire sales strategy – from quota setting and deal prioritization to the messaging, channels, and tactics used to win deals.

    Additionally, effective forecasting helps professional services firms avoid the kinds of issues that prevent them from hitting big-picture goals. For example, accurate forecasting can help orgs get ahead of uneven demand. That, in turn, reduces overspending on inventory, labor, and crucially, discounts and rework to make up for mistakes made by burnt out employees.

    That said, none of this is possible without complete, accurate data sets and end-to-end visibility. You need a unified ERP solution, CRM and project management capabilities. You’ll also need to eliminate data silos and manual processes. And — once you’ve built that strong foundation, embrace automation, AI-powered controls, and predictive modeling tools that help you prepare for many different futures.

    Firms must be able to use historical data, customer insights, market trends, and sales pipeline data to forecast future cash flow, make critical financial decisions, and come up with a game plan.

    Little things like minor operational snags, missing data points, and typos can undermine forecasting capabilities because the algorithm isn’t given an accurate version of the story.

    For example, Dynamics 365 Sales includes forecasting features that help users more accurately predict future revenue.

    But — you’ll need to connect the CRM module to your core financials and project management tools to unlock those benefits. Microsoft often recommends combining D365 Finance, Project Operations, and Sales. But you might opt to use ISV solutions or Power Apps to add CRM or project management capabilities instead.

    When predictions and recommendations are based on a false reality they’re not especially helpful — and in many cases, can cause serious damage.

    The point is, taking steps to ensure you have as much good data as possible and the right mechanisms in place to protect it allows you to gain control over at least some of the variables responsible that drive future outcomes.

    What’s more, cash flow tends to improve when you have access to real-time performance data and drill down into specific areas to learn which strategies are working, which ones aren’t, and intervene before things go off the rails. Plus, you’ll receive better recommendations from your AI.

    Final Thoughts

    Again, high-tech solutions like predictive modeling, prescriptive insights, and AI automation can’t predict the future. But, they do help firms prepare for a long list of future scenarios — enabling decision-makers to take action based on real-time conditions and pivot on-the-fly when plans fall apart. That is, assuming they’ve nailed all of the prerequisites mentioned above.

    Velosio helps professional services firms navigate the challenges of revenue forecasting, resource management, and competing in a complex, digital landscape.

    We offer consulting, cloud migration, and ERP services, professional services products that extend D365’s out-of-the-box capabilities, and long-term support. Contact us today to learn more about our solutions, process, and how we support our professional services clients.